Bullish positions on most Asian currencies strengthened over the past few weeks, a Reuters poll showed, reflecting newfound optimism that the United States and China would settle their long-drawn trade spat. Long bets on the Chinese yuan, Singapore dollar, Indonesian rupiah and the Thai baht rose substantially, a poll of 12 respondents showed.
With high level trade talks between Beijing and Washington kicking off this week, markets were hoping for a leeway before the March 1 deadline, when US tariffs on $200 billion worth of imports from China are scheduled to rise to 25 percent from 10 percent.
Bulls on the yuan and the Singapore dollar were at their highest since April 2018. China's trade tiff had battered risk assets across Asia, owing to the economic superpower's large trade exposure with most of the continent. The yuan has also seen some support following the Chinese central bank's attempts to stimulate the local economy, which has been cooling drastically since last year.
China's exports clocked a surprise rise in January, while its politically sensitive trade surplus with the United States narrowed. However, imports retreated, implying that domestic consumption was still weak. Long positions on the Thai baht were the strongest among its peers, and stood at a more than one-year high. Thailand's strong economic fundamentals, which consist of steady exports and domestic production, have made the baht a bastion of stability in Asia.
The currency outperformed its peers in 2018 and has also done so in 2019. Bearish positions on the Indian rupee retreated slightly, as short-term sentiment was bolstered by the Indian central bank's unexpected lowering of rates and policy shift last week. However, the rupee's mid to long-term outlook is clouded by perceived political turmoil ahead of India's national elections.
Bearish positions on the Taiwan dollar rose slightly after Taiwan's government trimmed its 2019 economic growth forecast, showing that weakening technology demand and slowing global growth were denting the country's exports and outlook.
The Reuters survey is focused on what analysts believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht. The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long US dollars. The figures included positions held through non-deliverable forwards (NDFs).
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